Every man wants his money to be invested double, it will double. Some people dream of their investment of 1 lakh rupees to become 10 lakhs. However, the question is, how much return is necessary on its investment? The answer makes one on one thing-the time. Suppose you want to double your money. If you want your money to double in just two years, then 41 percent return will be necessary annually.
For wealth creation, more time is not necessary but more time is necessary
41 per cent of the return on investment is not possible. If you have patience and you can give 10 years to your investment, then only 7.2 percent annual return will be necessary to double the money. If 20 years are given instead of 10, then only 3.5 percent return will be necessary.
The more time the investment is given, the more it will increase
This makes one thing clear from the example. The more time you give to your investment, the less returns are required every year. It is a magic of compounding. In this, money increases with money. This means that the longer time you give to increase the money, the more it will increase. So if you want to prepare a big fund from your investment, then you have to maintain investment for a long time.
If the period is high, the money can be doubled by less returns.
Suppose you have set a big goal. You want your money to be five times. If you give three years time for this, then 71 percent return will be required annually. It is not possible to get so much return without risk. If the investment period is reduced to 10 years, then only 17.5 percent annual return will be necessary. If the period is reduced to 20 years, then only 8.5 percent return will make your money five times.
One lakh can also be made 10 lakh rupees
Do you want to make one lakh rupees 10 lakh rupees? If you are not in a hurry then you can invest for 20 years. Only 12.2 annual returns will make your money 10 times. This can be done by investing in equity mutual funds or stocks. However, you have to maintain discipline in investment. If you want, you can also make 1 lakh rupees 20 lakh rupees. This is not impossible. This will require 16.2 percent annual return in a 20 -year period.
In investment, more importance than returns is of period
This leads to the conclusion that in investment is more important than returns. You cannot get more returns from the market every year. You cannot seek any stock that has the ability to give manifold returns all the time. You can just start investment soon. Only 10 per cent of the annual return can be prepared by your investment.